Analysts Scratch Heads Over Big Flower Buyout

Commercial printing and marketing giant Big Flower Holdings Inc. reached an agreement this week to be acquired as part of a financially complicated $1.9 billion re-capitalization deal, and both Big Flower and leveraged buyout firm Thomas H. Lee Co. are being tight-lipped about the pact.

The deal will fold Big Flower into BFH Merger Corp., a new entity formed by private investment concerns Thomas H. Lee and Evercore Capital Partners. Generally, re-capitalizations are meant to shift a company's balance sheet, either changing debt structure, bringing more capital into the company or making some similar change.

A spokesman for THL, Boston, said the firm isn't discussing its decision to buy Big Flower, adding that it planned to file a document with the Securities & Exchange Commission that would give information on the sources and uses of the money involved in the transaction.

With 1998 revenue of $1.8 billion, Big Flower is a big-time player in the printing space. It's a diverse company whose biggest unit, Treasure Chest Advertising, makes ad circulars, TV directories and Sunday comics for newspapers and retailers.

The New York company's customers include several direct marketers. Subsidiary Webcraft sells personalized direct mail services to nonprofit organizations, the financial industry and publishers. It works for other businesses such as auto makers through direct marketing and advertising agencies and it supplies digital and database marketing services as well. Its clients, either direct or through agencies, have included such names as MBNA Corp., First USA, Ford Motor Co. and Chrysler.

Another Big Flower unit, Laser Tech Color, supplies digital pre-press services to catalogers, agencies and packagers. The firm has worked for all of the top 10 U.S. advertising agencies, a company spokeswoman said. Big Flower also owns a stake in 24/7 Media Inc., New York, one of the largest online ad networks.

Big Flower officials would not elaborate on what they hoped for from the agreement, except to say in a statement that they expect the merger to assist the company's "mission to become the leading provider of advertising and marketing services."

Spokesmen at Webcraft and Laser Tech deferred comment on the acquisition to the parent company's main office.

Big Flower announced in April that it was looking into "strategic alternatives" -- usually code language meaning a company is putting itself on the block. Under the terms of the re-capitalization, Big Flower shares will be exchanged for $30 each, plus preferred stock with a face value of $5.25 each, along with warrants to buy stock in the re-capitalized company.

Wall Street seemed uncertain about the merger's value to Big Flower shareholders. The stock closed 11 percent lower when the deal was announced last Tuesday. The shares regained some ground Wednesday, edging up 5/16, or 1 percent, to 31 7/8.

Big Flower canceled its 1999 annual shareholder meeting, which was scheduled for the day the re-capitalization deal was announced. The company expects to have a shareholder meeting to approve the merger either late in the third quarter or early in the fourth quarter.

THL owns all or part of Experian Information Solutions, Eye Care Centers of America, Safelite Glass, battery maker Rayovac and beverage company Cott Corp. A spokesman at the firm said he was not aware of any stakes THL might hold in other publishers. Reports said THL's investment in Big Flower was greater than the money being put up by Evercore Capital. Evercore recently paid $850 million for American Media, publisher of the National Enquirer.